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Investing.com -- JPMorgan (NYSE:JPM) lifted its rating on The Wendy’s (NASDAQ:WEN) Company to Overweight from Neutral, driven by a more constructive long-term view on the fast-food chain’s cash flow profile, capital allocation, and growth potential.
The Wall Street giant also established a new December 2026 price target of $15, lowered from the prior $17 target.
“We are taking a fresh look at the equity story supported by mid-to-high single-digit free cash flow (FCF) yields as store economics stabilize and start to improve,” JPMorgan analysts led by Rahul Krotthapalli said in a note.
The upgrade follows a significant de-risking of near-term comparable sales expectations and what JPMorgan sees as visibility into medium-to-long-term development, especially in international markets.
The bank projects Wendy’s to generate around $605 million in FCF from 2025 to 2028, while total shareholder returns could reach $700 million through a combination of dividends and buybacks.
According to the note, the company’s focus on franchise accountability and capital-light expansion is expected to “result in a more durable asset base.”
“Certainly, Wendy’s is far from the biggest but after 50 years of brand presence can at least claim its own identity within the national Quick Service Restaurant (QSR) burger space,” the analysts added.
JPMorgan also analyzed a scenario in which Wendy’s pulls back on Build-to-Suit (BTS)-funded development of 185 stores. Doing so would lift 2028 FCF by about $55 million and enhance yield to as high as 9.3%, making the shares more attractive.
“The BTS program is designed to accelerate restaurant expansion by co-investing with franchisees, covering most of the building and real estate costs in exchange for higher royalty rates and rent payments,” the note explained.
The analysts flagged that near-term U.S. comp trends remain soft, down 2.8% in the first quarter. While global system sales are now expected to be flat to down 2% in 2025, upcoming initiatives like the “100 Days of Summer” campaign and Frosty innovation may support sequential improvement.
JPMorgan’s valuation is based on a 5.25% FCF yield on 2028 estimates, representing a 50bp discount to global large-cap QSR peers. It expects system sales growth of 3.5–4.0% annually through 2028, translating to 4.5–5.0% adjusted EBITDA CAGR and over 6% EPS growth.
